Court Nullifies Insurer’s Agreement with Insured to Allow Plaintiff to Proceed Directly Against Insurer Court of Appeal of Louisiana, Fourth Circuit, October 21, 2019

LOUISIANA – Nelcome Courville contracted and later died of mesothelioma. Before his death, he filed a lawsuit against a variety of parties based on his exposure to asbestos, and his wife and children were substituted as plaintiffs after Courville’s death. One of those parties, Reilly-Benton Company, Inc., filed for bankruptcy in 2017. Thereafter, the plaintiffs named Reilly-Benton’s insurer as a direct defendant pursuant to Louisiana’s direct action statute.

The insurer moved for summary judgment, arguing that a 2013 settlement agreement it had entered into with Reilly-Benton resolved certain coverage disputes between them and the precluded plaintiffs from recovering damages from the insurer. The trial court granted summary judgment, and the plaintiffs appealed.

On appeal, the plaintiffs argued that Louisiana law prohibits insurers from retroactively reforming insurance contracts to the detriment of any tort plaintiff. Because the settlement agreement between Reilly-Benton and its insurer prevented the plaintiffs from obtaining coverage under the policy that otherwise would have been available, the settlement agreement was contrary to public policy and, therefore, void.

The court agreed. It noted that one of its prior decisions had held that the relevant statute, Louisiana Revised Statute 22:1262, does not apply when another insurer challenges an agreement between insurer and insured that retroactively annuls coverage. However, the court had pointed out in the prior decision that the analysis would be different if a tort victim challenged such an agreement. The plaintiffs here were tort victims, and the court held that they were the intended recipients of the public policy protection set out in the statute. As a result, the court reversed the lower court’s decision and allowed the plaintiffs to proceed with their claims directly against Reilly-Benton’s insurer.

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